If the bidders at a first-price auction have true values of $78,$72,$66 and $65,the item will sell for
A)Just above $78
B)Just under $72
C)Just above $72
D)Just above $66

Question

​If the bidders at a first-price auction have true values of $78,$72,$66 and $65,the item will sell for
A)​Just above $78
B)Just under $72
C)Just above $72
D)​Just above $66

Quizplus · Accepted Answer

In a first-price auction, the highest bidder wins and pays their bid amount. Since the true values of the bidders are known, we can assume that they will bid up to their true value. Therefore, the highest bid will be $78, but the actual selling price will be just above the second-highest bid, which is $72. Therefore, the item will sell for just above $72.

​If the Bidders at a First-Price Auction Have True Values

If the Bidders at a First-Price Auction Have True Values